Department of Social Protection

Pension Provisions

Question 139: To ask the Minister for Social Protection if funds in additional voluntary contribution schemes can be made available for early draw down thereby creating a more humane and flexible system which is responsive to the reality of life of many persons living in Ireland today; and if she will make a statement on the matter. [8648/12]

Additional Voluntary Contributions (AVCs) are contributions made by employees in addition to any compulsory pension contributions they make to a pension scheme. They are used to improve the benefits of members over and above those provided by the pension scheme. AVCs are an integral part of pension savings and are normally availed off by employees to make up any shortfall they may have in their pensions. In common with regular contributions to pension saving, early access to pension savings is currently not permitted as they are designed to provide financial support to people in later life.

Pension coverage is still relatively low in Ireland and people are not making adequate provision for their retirement. Also, demographic indicators clearly indicate that increasing numbers of people are living longer and healthier lives with more of their lives spent in retirement than previously. The reduction in pension savings as a result of allowing people access their pension savings might have a short term benefit, however it could have significant longer term negative consequences by depleting the retirement savings of those who availed of it and could contribute to an increase in old age poverty.

Once the principle of keeping funds locked away until retirement has been breached it would be difficult to argue against a further withdrawal. Allowing people access to their pension savings before pension age would run totally counter to the policy of encouraging more people to save more for their retirement. Accordingly, there are no proposals to provide for early draw down of AVC funds or early access to pension funds.